Commodities Daily - June 30, 2020

> Oil price higher on upbeat global macro data; fundamental data on the radar. Today, investors will eye the release of the EIA's 914 report on US oil production in April, which could support prices, as it is likely to confirm a fifth consecutive monthly decrease in output. Furthermore, today and tomorrow investors will be digesting June production data for OPEC, which is likely to be upbeat, showing much improved compliance from May. In our view, the potential upside in Brent today will be limited to the technical range of $42.4-42.9/bbl, with the uptrend likely to be reversed tomorrow amid downbeat EIA refined product inventory data, which we think could push Brent back toward the $40.6-40.9/bbl technical corridor.> Gold range-bound, with potential upside in sight. Speeches by US Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin to the House Financial Services Committee are likely to be the main drivers for gold today. UK Prime Minister Boris Johnson is expected to announce GBP5 bln in new infrastructure spending. Data will include the preliminary Eurozone CPI for June and US consumer confidence. We think today's agenda offers more upside risk for gold, which is likely to test $1,789/oz technical resistance than yet again retreat to $1,768/oz technical support or even break below it toward the $1,750-1,760/oz technical range.OIL PRICE HIGHER ON UPBEAT GLOBAL MACRO DATA; FUNDAMENTAL DATA ON THE RADARYesterday, the current front-month Brent contract for August gained almost $2/bbl (falling just short of breaking above $42/bbl) before eventually settling at $41.71/bbl, $0.69/bbl above the previous settlement. The September contract, which will become the new front-month one tomorrow, settled at $41.85/bbl, implying contango at the front end of the Brent futures curve (although this month these two contracts were backwardated at times). This indicates that there's still some lingering concern about oversupply. One of the upbeat factors at play for global markets yesterday was the further recovery of economic sentiment in the eurozone in June: the economic sentiment index climbed to 75.7 points in June, from 67.5 in May. Another factor supportive for risk assets yesterday was a record 44.3% monthly spike in US pending home sales in May, as homebuyers rushed back into the market amid rock-bottom mortgage rates (according to US Mortgage News Daily, the average rate on 30-year fixed mortgage began May at around 3.20% but has fallen below 3% in late June). This morning, Brent is trading near $41.5/bbl, as investors are digesting better than expected Chinese manufacturing PMIs for June. This reassured investors that the recovery in Asia's largest economy is intact. Offsetting this optimism, however, are reports that Libya's state oil company has made progress in talks to resume exports, thus potentially meaning a supply boost is forthcoming. Also, Japanese industrial production data for May was weak, which has reinforced the prospect of a bumpy recovery in fuel demand. Today, investors will eye the release of the EIA's 914 report on US oil production in April, which could support prices, as it is likely to confirm a fifth consecutive monthly decrease in output from November's record high of 12.87 mln bpd. Note that on Friday, Baker Hughes reported a one-unit weekly drop in the US active oil rig count to 188. The rig count has been falling consistently since mid-March (down by 495 units), although the rate of decrease began to slow in mid-May. Furthermore, today and tomorrow investors will be digesting June production data for OPEC compiled by Reuters and Bloomberg, which is likely to be upbeat, showing much improved compliance from May. In our view, the potential upside in Brent today will be limited to the technical range of $42.4-42.9/bbl, with the uptrend likely to be reversed tomorrow amid downbeat EIA refined product inventory data, which we think could push Brent back toward the $40.6-40.9/bbl technical corridor. Note that overnight the API data on US oil and refined products will be in focus. It is likely to be downbeat in terms of refined products. With the coronavirus running rampant across many southern and western US states (many states are pausing or reversing reopening measures), the outlook for energy demand in the world's largest economy remains uncertain. Bloomberg recently reported data from the GasBuddy website that gasoline demand in the US fell 2.3% this past Saturday from a week earlier, which shows how the increase in virus cases is restraining LD RANGE-BOUND, WITH POTENTIAL UPSIDE IN SIGHTGold traded sideways yesterday within a tight $1,766-1,775/oz range, where it remained this morning. An increase in risk asset appetite (as reflected in a 1.5% rise in the S&P 500 to 3,053) amid an unexpected improvement in US pending home sales was offset by a speech by Fed Chairman Jerome Powell that was supportive of gold prices. He reiterated that economic relief and public health measures against Covid-19 must be continued (the combination of low interest rates and seemingly unlimited support from central banks are broadly supportive for gold) if the economic recovery is to be maintained, a message he is likely to deliver again today in Congress. This morning, global market enthusiasm amid upbeat Chinese manufacturing PMIs for June (which beat estimates and reassured investors that the recovery in Asia's largest economy is intact) outweighed news that the new national security law for Hong Kong imposed by Beijing had been passed and will be made public only later today, and that the US will withdraw some of Hong Kong's trade privileges. Speeches by US Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin to the House Financial Services Committee, where Democrats will likely criticize the government's fiscal stimulus plan to offset Covid-19, are likely to be the main drivers for gold today. Several other Fed, ECB and BoE officials are also scheduled to speak today. UK Prime Minister Boris Johnson is expected to announce GBP5 bln in new infrastructure spending. Data will include the preliminary eurozone CPI for June and US consumer confidence. We think today's agenda offers more upside risk for gold, which is likely to test $1,789/oz technical resistance than yet again retreat to $1,768/oz technical support or even break below it toward the $1,750-1,760/oz technical range. Tomorrow's macro highlights include China's Caixin manufacturing PMI, the FOMC minutes, DM manufacturing PMIs for June and the US ADP employment